“Correction”
The standard definition that a “correction” in an index is any fall from peak to trough of 10% or more. I have no idea where this definition comes from, and I don’t think it’s of any use.
So why do I have a problem with saying that a “correction” is any fall of 10%? First, it’s arbitrary.
Second, and more importantly, the word implies that afterward, the market is “correct,” that whatever the problem was has been “corrected.” That is dangerously misleading.
It doesn’t look to me as though we’ve corrected anything yet.
If a correction means correcting for fundamental valuation, there is a lot more to be done
The average Nasdaq 100 stock is now no higher than it was last February. The market has been led by the largest companies, and that the correction has further to go
I draw two tentative conclusions. First, this selloff was above all indiscriminate. It has all the hallmarks of a top-down move to get out of equities.
Second, the collapse into the close suggests miserable sentiment. Faced with an up market after a couple of tough days, people could have delighted that “buy the dip” was in force, and jumped on the bandwagon. Instead, they decided this was an opportunity to get out.
John Authers Bloomberg 21 January 2022, 6:51 AM GMT+1
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